Insiders at smaller firms often earn large profits from their stock purchases. In this area of the market, stocks are less researched and there’s more potential for explosive moves to the upside.
In this report, we are going to highlight some interesting insider buying in a US small-cap stock, Spark Networks SE (LOV:US). Spark Networks is a dating company that owns a portfolio of premium and freemium apps. The group’s brands include JDate, eDarling, JSwipe, EliteSingles, and Attractive World. The company is listed on the NYSE MKT and currently has a market capitalization of $180 million.
Spark Networks: Insider Buying
Our records show that in the last month, Osmium Partners LLC – Spark’s largest shareholder – and John Lewis – the Managing Partner at Osmium – have made a number of bullish transactions.
In late March and early April, Osmium Partners purchased call options on the stock on eight separate occasions (investors buy call options on a stock when they expect it to rise). The firm also made a few small purchases of stock in early April.
More recently, Lewis purchased LOV stock three times between 9 April and 13 April. Form 4 filings that the insider acquired 82,172 shares over this period, spending just over $600,000 on stock.
This insider activity is significant because Osmium is likely to have a very good understanding of Spark Networks’ prospects as the major shareholder (it held 16% of the shares at 29 March 2021). Osmium – which seeks to generate strong, risk-adjusted returns by investing in undervalued US small-cap companies – is an engaged owner of the companies it invests in, and actively discusses corporate strategy and capital structure with management teams and boards of directors.
Strong 2020 Results
Spark Networks recently posted a strong set of full-year 2020 results that beat both top-and bottom-line financial guidance. For the year, revenue came in at $233 million, up 36% year on year, while monthly average revenue per user increased by 7.4% to $20.93. Adjusted EBITDA for 2020 was $37.7 million, an increase of $27.4 million compared to $10.3 million in 2019.
Looking ahead, the company was optimistic about the future. “Going forward, we are excited about our growth potential as we fulfill our ambition to become the leader in social dating for meaningful relationships in this rapidly expanding sector," commented CEO Eric Eichmann.
Spark advised that due to increased user engagement, it expects to deliver 2021 annual revenue of $238 to $244 million and adjusted EBITDA of $33 to $36 million.
In light of these strong results and the confident tone from management, we see the insider buying activity here as bullish.